Difference Between Mortgage Banker and Broker
While shopping for a home loan the prospective buyer may either get assisted by mortgage banker or broker, where both assist in preparing the right mortgage, however the mortgage banker works for lending institutions like banks etc, from whom the loan is obtained and the mortgage broker is an intermediary working with many of the Financial Institutions arranging the right mortgages between borrower and lender based on the individual needs and expectation of the borrower.
When shopping for a home loan, prospective homebuyers have to contend with several mortgage options to find the right one for their needs. In this process, the professionals who assist them could either be mortgage bankers or mortgage brokers. It would be important to understand how they differ before one goes ahead to avail their services.
Although both help procure the right mortgage for a homebuyer but the basic difference lies in the fact that mortgage bankers represent a bank or other specific financial institution that lends money whereas the broker is not bound to any one lender or financial institution but is free to shop around for a mortgage based on the individual needs of the borrower.
In the course of this article, we would try to analyze some of the fundamental differences between banker and broker that might help a borrower make the right choice while seeking a home loan.
Mortgage Banker vs Broker Infographics
Let’s see the top differences between Mortgage Banker vs Broker.
Key Differences
- Mortgage banker represents the direct lender whereas the broker merely brokers the deal between the borrower and the lender.
- Mortgage bankers originate mortgages in their own names and with their own funds whereas mortgage brokers facilitate mortgage origination for some other financial institution that they don’t represent.
- While a mortgage banker works for a financial institution, his or her interests are tied down by the employer whereas a broker works independently and in a way represents interests of the borrower more than the lender.
- A mortgage broker might try to earn higher premiums by leading borrowers toward higher-priced loan options in some cases, while mortgage banker simply works within the options afforded by one specialized lender.
- Earlier, mortgage brokers used to offer greater flexibility in the choice of a loan by working with a variety of lenders but regulatory changes have slowly helped standardize loan programs in a way that makes mortgage bankers look like a more reliable option.
- A mortgage broker can only try to broker the deal between a lending institution and the borrower but can do little to sort out any subjective issues in loan application approval whereas a mortgage banker has the power to approve or reject a loan application on his or her discretion while working for the lending institution.
Mortgage Banker vs Broker Comparative Table
| Basis for Comparison | Mortgage Banker | Mortgage Broker | ||
| Definition | As per the Mortgage Bankers Association, a mortgage banker is “an individual, firm or corporation that originates, sells or services loans secured by mortgages.” | The National Association of Mortgage Brokers defines a broker as “an independent real estate financing professional that specializes in the origination of mortgages.” | ||
| Level of Flexibility | Employed by banks, credit unions or savings and loan associations, they offer a low level of flexibility by helping borrowers find the best possible of loan options provided “only” by that institution. | Mortgage brokers understand the needs of borrowers to find the best possible loan option provided by any number of lending institutions, thus offering a higher level of flexibility in choice. | ||
| Level of Reliability | A higher level of reliability working with a specialized lending institution. | The relatively lower level of reliability working independently to spot the right mortgage opportunities. | ||
| How Do They Earn? | Mortgage Bankers typically work on a salary with the lending institution, along with occasional performance-based bonuses or incentives. | Mortgage brokers work for their commission or a flat fee in some cases, usually a percentage of the value of the loan. |
Conclusion
Choosing from a mortgage banker or mortgage broker while looking for a home loan requires careful consideration of individual needs. Whereas one can look for greater flexibility by going along with a broker who can compare the loan options provided by a credit union and a bank, for instance, a mortgage banker would offer greater reliability by working through every aspect of the mortgage process and loan packaging to render the best service possible.
If one must go along with a mortgage broker it should be someone who has passed the state licensing exams and is well aware of the rules of the financing. This would reduce the possibility of being charged exorbitantly by a broker or ending up with a less than desirable loan option which barely fulfils one’s needs.
Every aspect of the question must be carefully weighed to arrive at any conclusion and to avoid any possible issues with loan repayments at a later date.
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